Under an employer's group life assurance policy, what is the normal tax treatment of the death benefit?
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A. B. C. D.D
Under an employer's group life assurance policy, the normal tax treatment of the death benefit would depend on the circumstances surrounding the policy.
If the policy is written in trust, the death benefit is not usually liable to any form of taxation. If the policy is not written in trust, the payment may be subject to inheritance tax, depending on the value of the policyholder's estate at the time of death.
Inheritance tax is a tax that is payable on the value of an individual's estate above a certain threshold, which is currently £325,000 in the UK (as of the knowledge cut-off date). If the value of the policyholder's estate, including the death benefit payment, exceeds the inheritance tax threshold, then the payment may be subject to tax at a rate of 40%.
Capital gains tax is not usually applicable to death benefits under a group life assurance policy. Capital gains tax is a tax on any profit made from the sale or disposal of an asset that has increased in value over time.
Income tax is also not usually applicable to death benefits under a group life assurance policy. Income tax is a tax on an individual's income, and a death benefit payment is not typically considered income.
In summary, the correct answer to the question is D. If the policy is written in trust, the death benefit is not usually liable to any form of taxation.